Contracting for a US corporation from the UK

**Platypus** · 31 March 2012, 12:59

Originally posted by andthereitgoes View Post

I will be starting some work as a contractor with a US Corporation under my UK Ltd company. I have done a simillar sort of thing with a company in India in the past. My question is apart from sending an invoice to the company do I (or the company) need anything else legally. I will be working based in UK only. There is no travel requirement.

The last post in the above mentioned thread talks about the US company witholding 30% of contract quote, acquiring ITIN numbers, filling W7 and W8 forms? etc. Logically I don't think my company should have to do any of that? or should I? Also, the US company that I am going to be contracting for has asked me to sign a 'sub-contractor' agreement. Should I be signing such document? At the same time the US company has set the payment terms as Corporation - Corporation meaning the payments will be settled between the companies (their US INC company and my UK Ltd Company)

Just to sum up my questions.
1. What are the legal requirements in my situation described above for myself and the UK Ltd company?
2. Does the US company need to withold 30% of the amount quoted on the invoice to the company?
3. Do I or the company in anyway need ITIN, W7, W8 etc?
4. Should I be signing the 'subcontractor' agreement with US company as I am doing this as a UK based Ltd company?

Thank you very much for your time, help and advice.

I've been contracted to an American company for several years now. I can answer your questions from my own perspective only.

1. A "bog standard" UK Ltd company is fine. You don't need anything else.
2. In my case, no. Remember not to charge the US company V.A.T. I'm sure folks on here will argue but I've taken advice from several accountants on this point.
3. In my case, no.
4. Yes you should sign the 'subcontractor' agreement - it helps the US company not get clobbered for your taxes

If you'll be paid in dollars you might consider opening a US$ bank account. I never did and I still wonder if I should have, or should now!

EDIT: I've answered (3) as "in my case, no" and let me explain why. I'm a subcontractor to the US company and I've signed a declaration to that effect. I send them an invoice. They pay it. It's a simple and standard B2B relationship. I think the OP in the other thread to which you referred needs to get better advice.

**andthereitgoes** · 1 April 2012, 18:05

Thanks

Originally posted by Platypus View Post

I've been contracted to an American company for several years now. I can answer your questions from my own perspective only.

1. A "bog standard" UK Ltd company is fine. You don't need anything else.
2. In my case, no. Remember not to charge the US company V.A.T. I'm sure folks on here will argue but I've taken advice from several accountants on this point.
3. In my case, no.
4. Yes you should sign the 'subcontractor' agreement - it helps the US company not get clobbered for your taxes

If you'll be paid in dollars you might consider opening a US$ bank account. I never did and I still wonder if I should have, or should now!

EDIT: I've answered (3) as "in my case, no" and let me explain why. I'm a subcontractor to the US company and I've signed a declaration to that effect. I send them an invoice. They pay it. It's a simple and standard B2B relationship. I think the OP in the other thread to which you referred needs to get better advice.

Thanks for your reply.

2. Can you shed some more light on the VAT aspect?
4. Currently they have put the 'subcontractor' agreement in my personal name. Surely this should be in the UK Ltd Company name isn't it?
5. Can you shed some more light on the US$ bank acocunt. As to the advantage of it? Also, I hope by that you mean opening a USD account with a UK bank? Would this be a personal or business account? Also what would be the advantage of it?

**BigTime** · 2 April 2012, 11:37

wrt VAT:
HM Revenue & Customs: How to work out your place of supply of services for VAT
The general rule for working out the place of supply of services (apart from those covered by special rules) You supply services to a:
The place of supply is:
business customer - the place where the customer belongs
non-business customer - the place where the supplier belongs

wrt $:
If the business is going to be paid in dollars, you can use a broker who'll give you a better deal on the exchange rate and also choose the best time to convert into £. HSBC and probably all the main banks offer $ accounts.

**darmstadt** · 2 April 2012, 12:22

Although not in the UK but still in the EU I've worked twice for US companies for long periods (up to 7 years in one case) and both times all I have had to do was send them an invoice and declare it here. One was a small LLC with a Las Vegas bank account and they just used to send me a check which I paid into my account here, the other was a large company with whom I had a B2B agreement. The large company did ask about taxes and insurances (particularly indemnity as I worked on their customer sites) but once it was explained that I was responsible for them, all was okay. No septic paperwork at all (oh, and don't charge them VAT.)

**Platypus** · 2 April 2012, 14:01

Originally posted by andthereitgoes View Post

4. Currently they have put the 'subcontractor' agreement in my personal name. Surely this should be in the UK Ltd Company name isn't it?

I've just looked back over the various contracts I've had and they're mostly in MyCo's name but sometimes my name appears too, e.g.

This Independent Contractor Agreement (“Agreement”) is made and effective this day, (date), by and between My Name, DBA “MyCo Limited” (“Independent Contractor”) and ClientCo USA Inc., (“Company”).

[ DBA means Doing Business As ]

But usually it says:

This Independent Contractor Agreement (“Agreement”) is made and effective this day, (date), by and between “MyCo Limited” (“Independent Contractor”) and ClientCo USA Inc., (“Company”).

So, in your position, I'd ask in the first instance for it to be your company name, and if they're not happy about that, then fall back to Your Name DBA YourCo. In the (unlikely it seems to me) event that they refuse, don't walk away, just accept the document with your name on it. Essentially this document is for them, not for you, as it shows the IRS that you are not an employee. In my case, the document includes this clause:

Independent Contractor is and throughout this Agreement an Independent Contractor and not an employee, partner or agent of Company. Independent Contractor shall not be entitled to nor receive any benefit normally provided to Company’s employees such as, but not limited to, vacation payment, retirement benefits, health care or sick pay. Use of company issued articles, such as temporary seating space, temporary business cards, phone or server access, or any other company issued articles do not, in any way, represent or imply a status of employment with the Company. Company shall not be responsible for withholding income or other taxes from the payment made to Independent Contractor. Independent Contractor shall be solely responsible for filing all returns and paying any income, self-employment, social security, sales or other tax levied upon or determined with respect to the payments made to Independent Contractor pursuant to this Agreement.

On the VAT issue, the key is a document called VAT Notice 741 Place of Supply of Services.

Long story short, under section 12, you're supplying services (of the type described in section 13) to where your customer belongs (i.e. the USA) therefore you do not need to charge them VAT.

**andthereitgoes** · 2 April 2012, 22:05

Thank you all.

Thank you all for replying. I am almost clear on what I orginally posted this thread for. Now I am a little confused about the VAT.

I understand I don't have to charge VAT, but I will get that cleared with the accountant, because isn't there a separate section on Electronically supplied services?
Unfortunately, I couldn't find any information on it. On HMRC website this link provides information about export of services. There is a link to Electronically Supplied services which results in "Page not found"

Platypus: I have a question wrt what you mentioned about the contracts. Have sent you a PM. Hope that's okay.

**Platypus** · 3 April 2012, 12:48

Originally posted by andthereitgoes View Post

because isn't there a separate section on Electronically supplied services

Really?

See this document
HM Revenue & Customs

I note that Notice 741 has been superseded by the above.

Reading the above, section 2.1 is clear that place of supply is outside the EU therefore VAT need not be charged. Section 2.4.1 says that for B2B, place of supply is where the customer belongs.

**andthereitgoes** · 3 April 2012, 12:53

Section 15.12

Originally posted by Platypus View Post

Really?

Yes. In the same link look at section 15.12
I tried reading through all of it, but by the time scrolled 3-4 pages, I had forgotten what I read above. Mind bending. Lot of coffee did help me get through.

Originally posted by Platypus View Post

Reading the above, section 2.1 is clear that place of supply is outside the EU therefore VAT need not be charged. Section 2.4.1 says that for B2B, place of supply is where the customer belongs.

I came to a simillar conclusion initially, but then I read 15.12 and got confused again.

**Platypus** · 3 April 2012, 16:59

Originally posted by andthereitgoes View Post

but then I read 15.12 and got confused again.

Section 15 is entitled "15. Schedule 4A, paragraph 16(2)(a)-(k) – B2C services that can be supplied in a customer’s country"

So it appears that section 15 does not apply to B2B services, such as provided by you and me.

Contracting for a US corporation from the UK